Northern Air Expands Service

May 9, 2008
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GRAND RAPIDS — Northern Air has seen a steady surge in both its charter business and in the purchase of fractional ownership in private corporate aircraft, a trend the company attributes to business travelers’ growing frustrations with the airlines.

Business travelers seem to be getting tired of relying on the airlines, because a lot of routes have been eliminated, schedules have been cut back, and connection times are longer. Canceled flights are another source of angst, so business travelers are looking at alternatives, said Chuck Cox, president of Northern Air and its subsidiaries, Northern Jet Management and The Company Jet.

“They see they’re not going to be able to get out and visit their customers and their plants and get home,” Cox said. “The airlines are having difficulty getting things done: Their unreliability is sending customers our way, no question. We have a tremendous amount of interest in our products and services.”

The company is meeting demand by adding new fractional share aircraft to its fleet, hiring more pilots and looking for acquisition opportunities that would allow it to establish a second base of operation that would complement its existing operation in Grand Rapids. That would also allow the company to expand its reach to new customers.

Northern Jet Management is the operating entity of The Company Jet, which offers Midwest companies on-demand access to corporate jet service through the purchase of fractional shares of aircraft. Fractional ownership offers the flexibility of private jet ownership without the expense or responsibility of sole ownership. Northern Air’s target market for its share program is middle market businesses and above. When a company buys a fractional share, it owns a corresponding time-portion of the aircraft. A 12.5 percent share of a plane, for example, entitles that company to 100 hours of use per year.

The jets in The Company Jet’s fleet have up to eight owners. The light business jets can land at some 5,000 airfields across the country, compared with the 500 domestic airports the commercial airlines can access. Cox said the company is doing “very well” in share sales in the Midwest, mostly in Chicago and Wisconsin. 

In recent months, in fact, The Company Jet has been called upon to “rescue” several clients, particularly in New York, who were scheduled to fly on commercial airlines but were faced with flight cancellations or significant one-, two- or three-day flight delays.  

“That’s new to us; we’ve never had that,” Cox observed. “That’s starting to happen because the airlines have reduced the number of seats and everything is full. The other thing we’re finding is that people who own a fractional share of an airplane that gives them, say, 100 hours of use are using those hours up.”

Beginning last year and extending over the next two years, Cox is investing $80 million to replace The Company Jet’s existing fleet of Cessna Citation Bravo jets with Bombardier Learjet 40 XR aircraft. The Bombardier Learjet carries a price tag of more than $9 million. The aircraft has an enhanced engine that enables it to land and take off from shorter airstrips and delivers faster “time to climb” performance: It takes the craft only 23 minutes to reach an altitude of 43,000 feet. The aircraft is designed and equipped to fly in and out of smaller, more challenging airfields.

The first of the new jets was delivered in 2007. Another is coming on line later this month; two more will be added in the fall and another will be delivered around the first of next year. Three more will join the fleet in 2009. By then the company will have 18 to 19 jet aircraft under management. It currently operates with 34 pilots and expects to hire six to eight more over the next year. Cox recently hired a couple of schedulers, as well.

Northern Air’s future expansion plans include opening a second base of operation within the next couple of years, probably somewhere in the lower Midwest, lower Ohio Valley or the Indiana area, he said.

Today The Company Jet operates within about a 170-mile radius of Grand Rapids — in Madison, Wis., Chicago, across the central part of Indiana and in Findley, Ohio. Those are the regions where its customers are located, but The Company Jet flies all across North America, Cox pointed out.

The second base will give Northern Jet Management and The Company Jet an operating base in reasonable proximity to its existing location so airplanes can be shared. Cox said the second base will cover a huge number of metro markets: Pittsburgh, Cleveland, Akron, Dayton, Columbus, Cincinnati, Louisville and Indianapolis.

“It gives us that next very large market, which we think is a great market for the businesses that we go after. Plus, it’s in close enough proximity that when we need airplanes in one place or another we can share them.”

The company could establish another base either by buying a large corporate hangar that has been vacated or by acquiring a fixed base operator at a smaller or a mid-sized city airport. Cox said Northern Air would hire a local manager for the other base of operation, and it would be overseen by the company’s leadership team in Grand Rapids.

Northern Air’s Company Jet service doesn’t replace the airlines; it supplements what the airlines do, Cox noted.

“Obviously, it’s more expensive to own your own airplane or own fractional shares in one, but people in business are seeing that they can get so much more done when they do,” he remarked.

Cox founded the Company Jet in 2002. Its 2007 revenues were $28 million. Cox has more than 25 years of aviation and travel industry experience and was recently elected to a three-year term on the board of the National Air Transportation Association, a private aviation organization.

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